Fie-Consult Perspectives

Uncertainty increases business risk, and general elections are engulfed with a high degree of uncertainty with regard to security issues and possible change in trade and economic policies. Large corporations and small businesses alike therefore have to plan in advance and brace themselves for the unknown outcomes during any electioneering period. Prudent risk management requires that any business should be able to assess its risk exposure and take appropriate risk mitigation measures to prevent, avoid or transfer the risks they are exposed to.


Security


General elections, and especially in Kenya pose a unique challenge to small business owners. Unlike in the developed economies where there is a higher probability of peaceful elections and transition of power, in our developing economies, elections tend to be marred with pre or post-election violence of varying magnitudes. In 2008 post-election violence, most small businesses were badly affected since they had to close down their operations for a long period of time when the violence persisted; hence resulting to huge business losses. Other small businesses were vandalized, and that too was an added loss for the small business owners; who had to incur huge capital expenditure to restart their ventures when peace was restored.


Going by the political climate across the country, having learnt from the bad experiences in 2008 and borrowing from the calmness after 2013 general elections; we are unlikely to experience the kind of post-election violence we had in 2008. However, that does not fully eliminate the risk of isolated cases of violence that might erupt spontaneously and lead to stock-outs and closure of small businesses, reduced customer numbers due to security issues or vandalizing of your business assets. It is therefore advisable to be prepared for such eventualities by way of business insurance; and proper management of your cash flows so as to have enough working capital throughout the electioneering period.


Change in trade & economic policies


Another major business risk during the electioneering period that is often overlooked by small business owners is the possible change in trade and economic policies when a government changes. In the Kenyan context, the change could be dual; at the county level and at the national level. Both the national and county governments set policies that govern business operations at the national and county levels respectively.

Kenya has a presidential system of government whereby when a new president or county governor gets into the office, they bring with them a whole new administrative team starting with an overhaul of the cabinet secretaries. The new administration will also bring with them new policies that they would like to implement in order to either boost economic growth at the national or county level; or to just prove that they are different from their predecessors.


Small businesses are more sensitive to some of these policy changes which may touch on taxes, borrowing interest rates, investment in business infrastructure, minimum wages, mandatory contributions such as NHIF, NSSF and county government levies on businesses among other regulatory issues that are likely to increase your cost of doing business. Although we do not get to hear Kenyan politicians talking much about these issues in their campaign trails, the fact of the matter is that when they get into office they will in one way or the other change them.


With every change in trade or economic policy, there will be a direct effect on your business profitability; depending on whether the policy change is increasing or lowering your business costs. It is therefore very important to be keen on these issues, and get to know what politicians on either side of the divide stand for with regard to policies affecting small businesses. In addition, depending on the expected policy changes you need to put in place risk mitigation measures in advance; in order to prevent your business from shocks when either side of the political divide gets into power.


Lobby group for small businesses in Kenya?


Except for the large corporations who lobby the government on trade and economic policies through their lobby groups such as Kenya Manufacturers Association (KMA), Kenya Private Sector Alliance (KEPSA) and the Kenya National Chamber of Commerce and Industry (KNCCI); the voice of the small businesses within the policy making circles is still very weak and they are mostly left out in the cold. As a result, policies that are particularly focused on their unique needs at their respective business growth stages are left unaddressed at the national and county levels.

Maybe it is time we had national and county level lobby groups for the small businesses in Kenya. If anything, more than 80% of employment in Kenya is in the SME & informal sector.


Author: Jeremy Riro - jeremyriro@fieconsult.co.ke